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The Debacle and Revival of Nestlé India’s Maggi

CASE STUDY, BUSINESS ETHICS
Indian Institute of Technology Kharagpur, 12 Pages
AUTHOR(S) : Dr. Susmita Mukhopadhyay - Assistant Professor, Utkarsh, Manju Jayakumar, Mirza Mabood Ali Beg, Mitrabarun Ghosh - Research Scholar - Vinod Gupta School of Management, IIT Kharagpur

Case Preview

The Debacle and Revival of Nestlé India’s Maggi

 

On June 5th 2015, the Food Safety and Standards Authority of India (FSSAI) directed Nestlé India to recall all the nine approved variants of Maggi noodles from the market after finding it unsafe and hazardous for human consumption as well as stop further production.1

Maggi Instant Noodles

Nestlé (then Food Specialities Limited) had introduced Maggi 2-minute instant noodles in India in 1982 as a new-generation food product.2 At that time, the  adoption of pre-packaged food products was very small in India.3 This product had then created a new category, instant noodles, as packaged food in India (Exhibit I).

Exhibit I: Excerpts from Nestlé India Code of Business Conduct

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The Maggi brand built up on the caring working mother image, a mother who was able to provide children with a ‘nutritious and tasty’ meal that could be prepared in just two minutes. The product promotion involved TV spots featuring modern-looking mothers and cheerful active middle class children.4 Cooked Maggi was distributed free of cost among up-scale schoolchildren. Nestlé organised competitions like the Maggi Quiz among school-kids, where Maggi was freely distributed among winners and everybody present could sample the product during breaks. Nestlé had roped in Indian film stars like Amitabh Bachchan5, Preity Zinta6 and Madhuri Dixit7 to promote the product by being brand ambassadors. Lately, Nestlé was trying to market to the bottom of the pyramid by focussing on advertisements targeting rural school-going children positioning Maggi as an easy and nutritive alternative meal8, and had created a low unit price packaging towards this strategy.

 


  • 1http://economictimes.indiatimes.com/industry/cons-products/food/maggi-ban-fssai-to-test-other-noodle-brands-pasta-macaroni-onradar/articleshow/47565357.cms and http://www.business-standard.com/article/companies/nestle-faces-heat-in-singapore-uk-on-magginoodles-produced-in-india-115060500287_1.html, June 6th 2015
  • 2 http://www.icmrindia.org/casestudies/catalogue/Marketing/Maggi%20Brand%20in%20India%20Nestle.htm
  • 3 http://www.icmrindia.org/casestudies/catalogue/Marketing/Maggi%20Brand%20in%20India%20Nestle.htm
  • 4 https://www.youtube.com/watch?v=P7eHOxGN6iw
  • 5 https://www.youtube.com/watch?v=fgV2fyRarQ8
  • 6 https://www.youtube.com/watch?v=-58xUjgbLGc
  • 7 https://www.youtube.com/watch?v=vJ0HL_jC-aY , https://www.youtube.com/watch?v=bn2pnkJ5BA0 , https://www.youtube.com/watch?v=lt7OzhuZlT4
  • 8 https://www.youtube.com/watch?v=TZTM_UdzvSU

 

Teaching Note Preview

The Debacle and Revival of Nestlé India’s Maggi

 

This case study introduces students and participants to how relationships transpire between consumer products and regulators responsible for oversight. It explores  the detriments caused to product brands by neglecting ethical responses to questions raised by government regulators and agencies and shows why companies must have a considered ethical response to such crises. Nestlé Maggi noodles had to be withdrawn from the market and huge quantities of the product recalled and  destroyed leading to considerable losses for Nestlé India. It also gave a toehold to new rival brand – Patanjali, to launch its product in the vacuum created in the market. The case study also shows how legal wrangles unfold in India (a representative growing economy) with national ramifications even when they have their origins in the remotest corners of the country.

Expected Learning Outcomes

  • -Understand the profound effect that regulatory agencies can have on consumer brands in developing countries
  • -Understand the benefits if using ethically correct responses from both the viewpoints of regulators and the consumer brand in responding to regulatory upheavals that can disrupt a market-leading brand
  • -Understand how the legal system works in cases of regulatory demands, how new entrants exploit the opportunity and how brand ambassadors react when the reputation of a brand is called into question

 

Case Positioning and Setting

This case study can be used in MBA, Executive MBA, and Management Development Programmes for Business Ethics Course as well as from the legal  perspective in courses on Legal and Institutional Dynamics. It can also be used in courses on Regulation in Public Policy courses to expound the effect of  regulatory activism.

Assignment Questions

  • I. List the stakeholders in the case. How did the ban on Maggi affect each of them?
  • II. What were the options for acting open to Nestlé India, FSSAI and the brand ambassadors of Maggi Noodles? Examine their actions in keeping with the various ethical theories.
  • III. Elucidate the stage of ethical development of Nestlé India is as brought out in this case. Does it show an evolution or a regression during the progress of the case?

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Abstract

This case study introduces students and participants to how relationships transpire between consumer products and regulators responsible for oversight. It explores the detriments caused to product brands by neglecting ethical responses to questions raised by government regulators and agencies and shows why companies must have a considered ethical response to such crises. Nestlé Maggi noodles had to be withdrawn from the market and huge quantities of the product recalled and  destroyed leading to considerable losses for Nestlé India. It also gave a toehold to new rival brand - Patanjali, to launch its product in the vacuum created in the market. The case study also shows how legal wrangles unfold in India (a representative growing economy) with national ramifications even when they have their origins in the remotest corners of the country.



Pedagogical Objectives

  • To understand the profound effect that regulatory agencies can have on consumer brands in developing countries
  • To discuss and understand the benefits if using ethically correct responses from both the viewpoints of regulators and the consumer brand in responding to regulatory upheavals that can disrupt a market-leading brand
  • To understand how the legal system works in cases of regulatory demands, how new entrants exploit the opportunity and how brand ambassadors react when the reputation of a brand is called into question

Case Positioning and Setting
This case study can be used in MBA, Executive MBA, and Management Development Programmes for Business Ethics Courses as well as from the legal perspective in courses on Legal and Institutional Dynamics. It can also be used in courses on Regulation in Public Policy courses to expound the effect of regulatory activism.



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